Recent Survey Reveals that More Doctors are Signing Non-compete Agreements

As fewer physicians are forming their own practices, they are finding one potential disadvantage to hospital or physician group employment: non-compete agreements. Physician employment contracts, particularly for specialists, increasingly include non-compete agreements or non-solicitation agreements (sometimes referred to collectively as restrictive covenants). This can lead to expensive, protracted legal disputes when doctors attempt to leave one physician group for another or desire to form their own practices. Further, many patients lose contact with their doctors when they switch practices. In a recent survey of nearly 2,000 primary care doctors in 5 states, 45% of the physicians surveyed had covenants-not-to-compete or other restrictive covenants in their employment agreements.

As large health systems look for ways to remain profitable, many are turning to physician practices to expand specialty offerings and attract new patients (or obviate the need for patients to go to other hospitals or practice groups for different medical needs). From 2015 to 2016, hospitals acquired 5,000 physician practices and employed more than 14,000 physicians, according to a study conducted by the Physician Advocacy Institute. According to the study, between 2012 and 2016, hospital-owned physician practices doubled and there was a 63% increase in hospital-employed doctors. Nothing in recent health care trends indicates an end to this movement.

Non-compete agreements are enforceable in every state but California. Some states, however, bar their use in certain industries, such as medicine and law. For example, Connecticut and Rhode Island passed laws in 2016 prohibiting non-competes between employers and physicians. Other states, like Colorado, while not outright refusing to enforce non-compete clauses against doctors, place limits on the contours of such restrictive covenants. The rationale for not enforcing or limiting the enforcement of such non-compete or non-solicitation agreements generally centers on the importance of continuity of care, a concern that can be especially important for patients with ongoing medical issues. According to those against enforcement of such provisions, cutting off access to a doctor is fundamentally different from disrupting one’s relationship with a hairstylist or investment advisor. The American Medical Association’s Code of Medical Ethics recommends that doctors avoid restrictive covenants whenever possible, reasoning that such covenants discourage competition, which can boost the quality and convenience of care while lowering fees.

For the hospitals and physician practice groups that utilize non-compete agreements, restrictive covenants, they explain, are necessary to protect their patient base and their investments in the training of new physicians admitted to the group. Without the protection provided by restrictive covenants, they argue, there would be little incentive to bring new physicians into the group which could cause medical innovation to stagnate and would hinder overall patient care and access to medicine.

Generally speaking, Illinois courts will enforce covenants not to compete or non-solicitation agreements in physician employment contracts as long as they are reasonable. This determination of reasonableness is made considering the totality of circumstances. Under this test, a restrictive covenant is reasonable if it is narrowly tailored in scope, duration, and geographic area to protect a practice group or hospital’s legitimate business interests.

Even in states, like Illinois, where such agreements are generally enforceable, physicians are pushing back in court and making new arguments for unenforceability. These arguments ask courts to take additional factors into consideration like the emotional well-being of patients and the patient’s right to choose his or her doctor in addition to the typical factors courts have traditionally considered under the totality of circumstances test.

If you are an employer seeking to protect your confidential or proprietary information or you are a physician being asked to sign a non-compete agreement, it is always advisable to seek the assistance of an experienced non-compete attorney. The attorneys at Lubin Austermuehle have over thirty years of experience defending and prosecuting medical practice disputes between physicians over ownership disagreements and non-compete agreements and unpaid wages and a wide variety of other business dispute lawsuits arising between physicians in the same medical practice. Lubin Austermuehle a firm of Chicago business dispute attorneys handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat.

Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex class action, copyright, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes. Our Naperville and Hinsdale business dispute and restrictive covenant lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago and Oak Brook area businesses and business owners who are victims of fraud. You can contact us by calling at 630-333-0333.  You can also contact us online here.

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